Direct Contract With Tenants after Initial Lease Finishes

[wjday]

Hi,

We have had tenants in our rental property for nearly 2 years without issue and the initial contract term comes to an end in April. A local estate agent found our tenants and charged us 8% "finders fee" which we paid monthly over the two years.

Now that the initial 2 year term is over, we would like to keep the tenants on for another two years but the agency wants to continue to charge the finders fee. The contract does state that this is applicable whilst the tenant that they have found is in the property but the tenants have said that they would happily sign a contract directly with us (we could effectively just use the existing contract and remove the letting agent name).

Paying this fee indefinitely seems like a bit of a rip-off - the agency found the tenants but we feel they should only be paid for the term of the intial contract.

We have pointed this out to the agency but they have said the tenants are their clients and we have to pay.

This must be quite a common situation amongst landlords/letting agents - just wondered where we stand from a legal/moral perspective? Could we advise the tenants to give notice to the letting agents that they no longer want to be a client of theirs? Surely if we want to rent out ot these tenants and the tenants are happy to deal with us directly, the letting agency have got their finders fee and anything after the initial term of the contract is nothing to do with them?

Any advice/experiences appreciated...!

[Stef Cooke]

It is common. And the LA is right!

Not sure about the legality of your solution.. would be interesting to read the general consensus!

[Lawcruncher]

Whilst I can find no authority to support the view, I think it has to be the case that a contract for services which is not for a fixed duration has to be terminable by notice.

[jpkeates]

If the agents are saying that the tenant are their client, they should explain how they resolve the conflict of interest with the fiduciary duty they owe you as your agent.
That was a dumb thing for them to say - they should have relied on the contract between you.

There must be some kind of notice in the agreement, usually with a fee for ending the arrangement early. While the usual claim is that agents are simply ripping you off, this is how they make money, sometimes a tenant stays and sometimes they don't - they make a decision about what to charge for their service and you agree to it (and have now changed your mind).

And the suggestion that you would steal the agent's agreement and cross their name out doesn't leave you on the side of the angels either.

[theartfullodger]

You have the option of requiring copies of all documents from agent (tenancy, deposit, inventory, references, photos etc etc..) and any monies held by them. then simply instruct tenant to deal with and pay you from now on. And see if the agent sues you for unpaid % commission. Suspect they won't.

You won't need a new AST - the existing one is fine, assuming it names you are landlord: Indeed it is wise not to grant a new AST, probably with new pre-requisites (eg right-to-rent checks) and with additional longer periods before you can evict tenant.

[PaulF]

Reasonable Notice

It's the old chestnut of what the termination period states in the terms of business, and under the Consumer Protection from Unfair Trading Regulations 2008 it has to be 'reasonable'. Anything more than 3 months would be frowned upon if the agent decided to take further action. One month would be more like it.

[jjlandlord]

and under the Consumer Protection from Unfair Trading Regulations 2008 it has to be 'reasonable'.

A BTL landlord isn't a consumer, though.

[jpkeates]

Might not be a consumer - I wouldn't be, but many would.

[jjlandlord]

Might not be a consumer - I wouldn't be, but many would.

Only 'accidental landlords' might be.

A BTL landlord isn't a consumer, by definition.

[jpkeates]

The vast majority of landlords have one property (I don't really know how to otherwise define an "accidental landlord" without making it too subjective to be useful).

The consumer legislation defines a consumer as "an individual acting for purposes that are wholly or mainly outside that individual's trade, business, craft or profession".

That seems to assume that individuals only have one trade, business, craft or profession, and for most landlords, I don't think being a landlord would be their main trade, let alone their only one.

[jjlandlord]

It does not matter how many properties you have or whether this is your main or only business.

A BTL landlord acts in relation to his business, which is BTL.

If you only have one property that you purposely bought to let or purposely decided to let to make money you are not an 'accidental landlord', you decided to go into business.
The term 'accidental landlord' relates to the circumstances, not the number of properties, in the same way as consumer v. business also relates to the circumstances.

[jpkeates]

It's not a binary effect.
Acting as part of a business doesn't preclude someone from being a consumer.

A postman who lets properties is still a postman by trade.
Given the wording of the legislation, which seems to imply that a profession or trade is singular per person, for a landlord not to be a consumer they'd presumably have to spend more time doing or earn more from letting than their "other" trade or profession.

If the mere act of carrying out an activity as a business would stop it being consumer activity the definition could say that, and it doesn't. It talks of someone's trade or profession, and I don't think most landlords are landlords "by trade".

[jjlandlord]

Acting as part of a business doesn't preclude someone from being a consumer.

Well, it does.

The legislation does not state nor imply a single business or trade per person, which would be rather nonsensical.

I'll leave it there as I don't see what is arguable.